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CFPB Offers A View Of Profit Sharing

The CFPB recently announced that it will update the TILA loan originator compensation rule (Rule) in July of 2012. The updated rule may cause some new concerns regarding the implementation of the current Rule or it just may actually provide some sorely needed repairs for issues, strange and otherwise, that have dogged the Rule from the very start.

One issue in particular has been fomenting all along: the FRB’s interpretation of the Rule (and the interpretation informally adopted by the FDIC) regarding contributions made to retirement plans on behalf of loan originator employees. The FRB deemed such contributions to be compensation and subject to the restriction that compensation cannot be based on the terms and conditions of the loan transaction. This is because the FRB asserted that profits were considered a proxy for loan terms and conditions.

Recently, the CFPB has weighed into this matter by declaring that employers should be permitted to contribute to "Qualified Plans" out of a profit pool derived from loan originations.

So let’s discuss what this all means and if this issue is really resolved! *

LENDERS COMPLIANCE GROUP is the first full-service, mortgage risk management firm in the United States specializing exclusively in outsourced mortgage compliance and offering a full suite of services in residential mortgage banking for banks and nonbanks.